The sword of Damocles finally fell on Tuesday, March 4 as U.S. President Donald Trump followed through with his threat to place 25 per cent tariffs on Canadian goods, but a member of UNBC’s faculty of business and economics wonders if it might teach Canada a valuable lesson despite short-term economic pain.
The only exemption to Trump's 25 per cent rate is Canadian energy, which had a smaller 10 per cent tariff slapped on it.
In response, Canada has implemented countervailing tariffs. Premier David Eby announced that BC Liquor Stores would be pulling products from Republican-led U.S. states and both the provincial government and Crown corporations would prioritize first Canadian businesses and then non-American businesses for their purchasing.
Reached by phone on the eve of the tariffs’ implementation, longtime UNBC instructor Charles Scott said he thinks their impacts will be “fairly immediate.”
“If it’s forest products, we’re producing pretty consistently,” Scott said.
“We don’t have large lead times on it and even if you’ve got a delivery schedule … it’s fixed months in advance. You’ve got to ship this many board feet at that timeline, so once it kicks in, it kicks in pretty immediately. The impact of previous tariffs on softwood lumber have pretty consistently resulted in rapid implementation and rapid impact.”
Despite the tariffs on Canadian products, Scott said the U.S. will still be unable to meet its domestic needs for things like lumber.
While U.S. companies might look to European lumber in the face of tariffs on Canadian goods, that will only be helpful as long as Trump doesn’t impose tariffs on the European Union as well, something he has threatened to do.
Combined with the Trump Administration’s focus on deporting illegal immigrants, which is affecting industries that rely on the labour they provide, he said the impact of the tariffs will be higher prices in the U.S.
In Prince George, Scott said he thinks businesses with American clientele will be affected in the short term.
As an example, Scott named KJM Sales, a local manufacturer of industrial components with clients in both the U.S. and Canada. He said companies like KJM, which are able to compete due to the competitive prices they charge will lose that advantage in the eyes of American businesses.
The knock-on effect of local export businesses losing business could mean a reduction in salary and jobs for their employees, which means they have less to spend in this community.
However, he noted that when it comes to forestry, a lot of local mom-and-pop businesses will have already experienced these kinds of impacts from the devastation wreaked by pine beetle and spruce bugs.
When it comes to things like food imports, Canada’s counter-tariffs could affect businesses like restaurants because this country is so dependent on American agriculture.
Rather than get too bogged down into a tit-for-tit escalation of retaliatory measures, Scott said he’d rather see Canada reduce its dependency on the U.S.
“95.5 per cent of the human race does not live in the United States, 95 per cent of humans walking the planet don’t live in North America,” Scott said.
“Now, this is the richest four and a half per cent, no question. If you have to live beside somebody, the U.S. is the best (country) to live beside, but it really is best not to have as large a portion of your total trade going into one market because you become very, very dependent on them.”
While Trump is shifting the U.S. away from its previous position as the world’s policeman to focus on domestic concerns early in his second term, Scott said that started before him and this reality will outlast him as well.
Another factor in Canada’s dependence on the U.S. is the worsening state of agriculture. Scott said California’s Central Valley, where 65 per cent of the country’s fruit and 50 per cent of the vegetables are grown is drawing so much water from its aquifer that the portions of the ground have sunk by as much as 30 feet.
He said that isn’t sustainable and Canada was going to find that out eventually. With the tariffs, our country has the chance to pivot before Mother Nature forces us to.
“At the end of the day, we become less dependent on one market and more diversified in our trade,” Scott said.
“I don’t enjoy going to the gym, but my life gets enormously better when I do … so this is about us getting to where we need to get to, whether or not we like it and whether or not we want it, because it is simply better not to be dependent on some people who are increasingly trying to use that as leverage to squeeze us.”
Potential markets Canada could target include India, which Scott said is interested in Canadian expertise in water management, Australia and South Africa.
“We do a really good job with really important stuff and there are customers that we need to give a better understanding of that, who do not live in the United States, that need our product, that can pay for our product, but don’t think of us,” Scott said.
Ultimately, he said the United States is about to learn a hard economic lesson that a trade war makes things more expensive for everybody.
In a March 4 interview, KJM Sales owner James McIntosh said about 90 per cent of his customers are within Canada and 10 per cent of their product goes to the U.S.
While he said he’s not happy with the tariffs, he said it’s going to be the end consumer that will feel the biggest impacts since his company is a middleman.
“I’m not absorbing any of the increased costs from the tariff,” McIntosh said. “I’m not sitting here going like ‘oh my goodness, I’m gonna lose … whatever the tariff amount is.’ It’s just an added cost for our end customer, which means that they buy less.”
That could have a trickle-down effect on his business over the long term. In the short term, McIntosh said they’ll be watching their costs and the markets but won’t be changing their operations much. If possible, they’ll look to use non-tariffed goods to find a competitive advantage.
If things slow down enough, they may have to consider layoffs.
Expanding to other markets isn’t an appealing prospect. McIntosh said it’s “a fool’s game” to compete against Asian companies in Asia as China has taken on much of the world’s manufacturing.
“Australia is too far away, the Pacific Ocean is massive,” he said. “Can we ship things down to Mexico? I’m sure we can, but they also make things cheaper there. There’s also South American, there are lots of markets down there, but you’ve got to go exploring.”
As for whether Canada’s counter-tariffs will hurt his business, McIntosh said it depends on what Prime Minister Justin Trudeau decides to impose them on. However, he said he believes that increasing costs and increasing inflation as a result doesn’t solve anything.
The initial list of Canada’s counter-tariffs released on March 4 wasn’t as far-reaching as America’s blanket tariffs. Products affected include many food products, plastic building materials, tires, clothing, bedding, clothing, kitchen appliances, motorcycles, arcade games and more.
The dollar value of these tariffs is said by the federal government to be around $30 billion. If the U.S. doesn’t change course, Canada is set to add tariffs to another $125 billion worth of American goods three weeks from now.
“It’s proven throughout history, tariffs don’t work,” McIntosh said. “If the U.S.’s goal is to crush the Canadian economy, there’s other ways to do that. You can do it quickly. You don’t need to play the long game and put on tariffs. It just doesn’t make a whole lot of sense, but nothing the American president does makes a whole lot of sense.”
